Sawmills and Wood Preservation

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 2,600 sawmills and wood preservation companies in the US produce and treat a variety of wood products, including structural elements and dimension lumber. Major revenue categories include softwood lumber, hardwood lumber, preserved wood products, and wood chips. Sawmills may provide wood preservation services as a final step of production. Some large companies are vertically-integrated and own timberland or downstream operations, including divisions involving real estate ownership and residential construction.

Sensitivity To Economy And Construction Activity

Demand for wood products is highly dependent on the health of the construction and household furniture industries, both of which are sensitive to economic conditions.

Variable Timber Costs And Supply

The cost and supply of timber can be volatile, and affect margins and profitability for sawmills and wood preservation services providers.

Industry size & Structure

The average sawmill and wood preservation firm operates out of a single location, employs about 35-36 workers, and generates $18 million annually.

    • The sawmill and wood preservation industry consists of about 2,600 firms that employ 93,400 workers and generate $47.8 billion annually.
    • Sawmills account for 90% of firms and 78% of industry revenue.
    • The sawmill industry is fragmented; the top 50 companies account for 53% of industry revenue. The wood preservation industry is concentrated; the top 50 companies account for 85% of industry revenue.
    • Large companies with sawmill operations include Weyerhauser Company and PotlatchDeltic Corporation. Large companies that provide wood preservation services include Koppers Holdings, and Pacific Wood.
    • Some large companies are vertically-integrated and own timberland or downstream operations, including divisions involving real estate ownership and residential construction.
                                  Industry Forecast
                                  Sawmills and Wood Preservation Industry Growth
                                  Source: Vertical IQ and Inforum

                                  Recent Developments

                                  Sep 25, 2023 - Sawmills’ Prices Drop, Labor Costs Rise
                                  • At mid-year, wood product shipments were down slightly, and inventory values declined moderately compared to the same period in 2022. This may suggest sawmills are trying to work through inventory that was built up as a hedge against earlier supply chain issues. Producer prices charged by sawmills and wood preservation firms were down significantly in mid-Q3, year-over-year. Lower inventory values and producer prices may be due to lumber prices coming off their pandemic-era highs and weaker housing demand amid elevated interest rates. In mid-2023, residential construction spending was well below year-earlier levels. At mid-year, industry employment was flat compared to a year earlier, but wage growth was up sharply over the same period. Weaker pricing combined with high labor costs could pressure sawmill margins.
                                  • US mortgage applications for new home purchases rose 20.6% in August compared to a year earlier, according to the Mortgage Bankers Association (MBA). New home mortgage applications were up 4% in August over July. The MBA’s Deputy Chief Economist Joel Kan said, “There was strong purchase demand in August for newly constructed homes, as existing for-sale inventory remains low with most homeowners locked into lower mortgage rates and unwilling to give those rates up in this higher rate market.” New home sales are a driver of paint and wallcovering demand.
                                  • Home builder confidence declined in September as high interest rates and materials and labor shortages undermine buyer purchasing power, according to the National Association of Home Builders (NAHB). Home builder sentiment, as measured by the NAHB/Wells Fargo Housing Market Index (HMI), fell five points to 45 in September 2022, which followed a six-point drop in August. Any HMI reading over 50 indicates that more builders see conditions as good than poor. The HMI’s September decline was the first drop in five months. The NAHB said mortgage rates above 7% are hurting housing affordability. Supply-side challenges - including shortages of workers, materials, and available lots – are also contributing to higher home prices.
                                  • The Associated Builders and Contractors (ABC) Construction Backlog Indicator dropped 0.1 months to 9.2 months in August compared to July. However, backlogs were up 0.5 months compared to August 2022’s 8.7 months. On a month-over-month basis, a 0.3-month drop in the commercial and institutional backlog was somewhat offset by a two-month rise for the infrastructure backlog and a 2.5-month gain for the heavy industrial backlog. The ABC’s Construction Confidence Index for sales rose to 58.1 in August from 57.9 in July. A Confidence Index sales reading of 50 or more indicates most contractors are optimistic about sales. ABC Chief Economist Anirban Basu said, “There’s no sign of a construction recession in the near term. If anything, contractors are more upbeat, as policy and technology shifts along with economic transformation, are creating substantial demand for improvements and growth in America’s built environment.”
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